In brief, forfeiture is a landlord’s right under a lease to end the lease and re-enter the property on a breach of the tenant’s covenants, such as non-payment of rent, or a specified event, such as the tenant’s insolvency.
A former tenant may apply to court for relief from forfeiture under section 146 of the Law of Property Act 1925. The court would then exercise its discretion as to whether to grant relief, which essentially involves balancing the landlord’s entitlement to deal with its own property against the former tenant’s right to apply for relief from forfeiture. If a court grants relief, the effect is as if the lease had never been forfeited.
This raises the question of what impact a landlord’s grant of a new lease to a third party has on a former tenant’s application for relief from forfeiture. In short, a tenant may still apply for relief from forfeiture, but the grant of the new lease could affect the way in which the court exercises its discretion.
A court will take into account various factors, including where a new lease has already been granted to a third party, whether the former tenant delayed in applying for relief from forfeiture and whether the landlord acted quickly and unreasonably in granting the new lease.
A long delay by a former tenant could result in a landlord being denied its right to deal with its property and could therefore count against the former tenant, whereas if a landlord entered into a new lease almost immediately without giving proper notice to the former tenant, this could weigh against the landlord.
A court will also consider whether the new tenant knew of the forfeiture and, therefore, of the possibility that the former tenant could make an application for relief from forfeiture. If a new tenant did know, then this is a factor that will count in the former tenant’s favour.
In the event that relief from forfeiture is granted, the original lease would be reinstated, but with the new tenant as the former tenant’s landlord, while the lease between the new tenant and the original landlord would become an intermediate lease, under which the new tenant would have a claim in damages against the original landlord.
In the circumstances, a landlord, having forfeited a lease, would be well advised to write to the former tenant, and any other party with an interest in the lease, putting them on notice that a new lease will be granted after the expiry of a period. This should be sufficient to allow the former tenant a reasonable amount of time to consider its options and potentially apply for relief from forfeiture.
A former tenant, on the other hand, should not delay in making an application for relief from forfeiture.
If you would like to discuss this or any commercial property matter, please contact the team on 01772 258321.
I don’t like to impose but as a insolvent person< I may be facing forfeiture procceedings . Many years ago I added a bathroom extension to my flat – not realising with a 76 year lease that this would necessitate the permission of the freeholder since with all the necessary local authority permissions , I regarded this as an improvement. I am currently terrified that since learning of the extension , I shall arrive home some evening to find the freeholder has changed the locks. Can I ask please if the landlord mustALWAYS apply to court before forfeiture – and please advise if I am absent from the property{caring for my ill father )- if this allows the landlord to re-enter without a court order – I am most deeply obliged to you.
With Kind Regards
Niall Kavanagh
While proceedings for forfeiture can in principle be brought for non-payment of ground rent, if this is a residential, long lease, it would be worth clarifying whether the landlord has complied with the requirements relating to demands for ground rent set out in the Commonhold and Leasehold Reform Act 2002. However, if the landlord was entitled in law to issue the proceedings, it would be difficult to argue that there should be no liability for their reasonable legal costs. In order to advise on what is reasonable, we would need to have sight of the documentation relating to the claim, in addition to a detailed summary of the events leading to the issue of court proceedings. Please feel free to contact me if you would like to instruct us to advise further on this matter.
My client has been served forfeiture proceedings for non payment of ground rent of 3 years totalling £12. He has paid the £12 (Which had not been requested and the collector had changed) The freeholder and his solicitors want £1200 costs to withdraw the claim. How good is his chance of persuading the Court not to award costs
Dear Elaine
Following the forfeiture, the fixtures would have reverted to you, unless there is an express clause in the lease to the contrary. The lease may also dictate whether you can sell or dispose of other goods and, if so, how any sale proceeds should be applied. In the absence of such a clause, however, they will remain the property of the former tenant. If you sold the goods, the former tenant could bring a claim against you for conversion. You may decide to take this risk, bearing in mind that if they did this, you would be entitled to counter claim for any rent arrears. If you wish to be sure that the former tenant cannot take this course of action, however, the best option would be to serve a notice under the Torts (Interference with Goods) Act 1977, taking all reasonable steps to bring this to the former tenant’s attention. After a reasonable period of time, you could assume that the goods had been abandoned and therefore sell them. However, the sale proceeds would technically remain the property of the former tenant and the law is unclear as to whether they can be set off against rent arrears. You should therefore retain the whole of the proceeds of sale for the former tenant, at least for a reasonable period.
Kind regards
James
I have served a. s146 Notice.sept 13 and acknowledged 14 sept by the tenants solicitor. The lease has since been forfeited and locks were changed 25th October But due to lack of communication from the tenants. This has now left us with the problem of what to do and how to get rid of the equipment of a takeaway shop and being able to re-let. I have a new tenant waiting but for a different trade altogether ..hope you can guide me. Elaine.